Griffin Bus Ch11-b

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Business Fifth Canadian edition, Griffin, Ebert & Starke

© 2005 Pearson Education Canada Inc.

CHAPTER 11

Producing Goods

and Services





Service operations and Goods production

Service operations : Activities producing tangible and

intangible products such as:

Ex : transportation ( bus driver ) ,

: food preparation ( to be frozen then be ready on shelves

to sell)

: education ( learning )

Goods production : Firms that make tangible products ,such as :

Ex : radio , newspapers , buses , textbooks .

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© 2005 Pearson Education Canada Inc. 11-3

Operations processes :

We can classify the types of production according to the

differences in its Operations processes

Operations processes mean :set of methods and technologies

used in production of a good or services ) .

Operations processes will be as one of these two forms :

A-Analytic

Production process in which resources are broken down into

components to create finished goods (extracting minerals from

land )

B-Synthetic

Production process in which resources are combined in the

production process ( Computers )





Services processes :

We can classify the types of services according to the extent of

customer contact required

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Customer Contact :

A-Low-contact system :customers do not need to be physically

present to receive the service , ex : electric power

B-High-contact system : customers need to be physically present ,

ex : haircuts, medical examinations, bus transport





Production Managers are responsible for creating utility for

consumers regardless of industry

(Ex : Food , drug , petrochemical ------- )

1-Time Utility : the product is available when it iswanted

2-Place Utility : the product is available where it isneeded

3-Form Utility : the product is available when it is

transformed into the needed final product4-Possession Utility : The product is consumed andsatisfaction occurs during the consumption process





Differences Between Goods and Services

1-Focus on Performance :Goods are produced

but Services are performed to meet the needs of customers :Focus on thecustomers themselves (Haircut) or Focus on their possessions ( auto repairs )

2-Focus on Process and Outcome :Manufacturing goods focus on the

outcome of the production process ( finished goods )

But the products of most service operations are combined of goods and

services ( making a pizza and on delivering ) process and outcome

3-Focus on Service Characteristics :

a- Intangibility Services : cannot be touched, but can be tasted, smelled, feeling

pleasure , satisfaction .

b- Customization : Each service is performed to the customer’s needs (dental work) he must go by himself not someone else’s .

c- Un-storability : Most services must be taken when offered or the opportunity

is gone (Plane flight, house cleaning , child care )



Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 11-7

4-Focus on the Customer-Service Link:

=Service operations often treat the customer as part of operations process

itself . Ex : to get a haircut , you have to go to the beauty salon .

But in the operations process : the physical participants in the operations process

, the consumers can affect it : the manager of the location will concern on the

convenient location of the salon , offer needed services at reasonable prices ,

appropriate number of employees to meet customer requirements .

= E-commerce : the customers are virtually as opposed to the physical , presence

of customers ,with access 7 days weekly, 24 hours daily . Consumers interact

with sellers electronically

== EDS : electronic data system ==Many companies can link with customers , clients , suppliers , and employees

= software products can be viewed , purchased , tracked , and delivered if you

are a member of the network .




Operations Planning

Key issues include1-Forecasting

2-Planning : Capacity, Location , Layout,

Quality and Methods planning




1-Forecasting

Define : Estimating future demand for new andexisting products .

May be short to long term (2 to 5 years) .

There are two methods to forecast :

1-Qualitative Methods

based on judgment and experience

obtained from experts or groups of experts

2-Quantitative Methods

based on statistical projections

obtained from historical sales levels




2-a -Capacity Planning

The amount of a product that a firm can produce

under normal conditions

accommodate seasonal changes in production




Capacity Adjustments

Companies may make or buy the parts &

components required in its production

processA-making the component requires additional

capacity

2-buying the component reduces capacityrequired




2-b-Location Planning

The decision of where to place a productionfacility is based on:

1- location of customers and suppliers

2- availability of labour

3- proximity to raw materials

4- transportation costs

5- taxes6- community attractiveness




2-c- Layout Planning

1-Productive facilities are used for transformingraw materials

workstations, equipment

2-Nonproductive facilities do not transformstorage & maintenance areas

3-Support facilities support the organization

cafeteria, parking lot, restrooms




2-d- Process Layout

=Well suited to job shops that produces many one – of- kind

products and each product requires different kinds of work

= grouped based on their function in the production

process

Ex:

= cafeteria : different sections , the customer does not need

to dink all the types of drinks provided in the cafeteria

=hospitals : different kinds of clinics , the patient does notneed to get the diagnoses in all clinics




2-d1 Cellular Layouts

When a similar group of products follows a fixed flow path and

it requires a similar process (from beginning to end )

Ex :Making pockets for shirts , coats , blouses . Although each type

of pocket is unique in shape , size , style .

All pockets pass stage through stage through the cell from

beginning to end in a continuous flow .

Advantages : less material handling ,transit time and inventories

of goods in process are lower because flow distances are usually

shorter




2-d2 Product Layout

When making one type of product in a fixed sequence andis arranged according to its production requirements

Advantage : efficient for producing large volumes of

products and often uses assembly line automobile , foodprocessing , and television – assembly plants use product

layout .




1- Flexible Manufacturing Systems (FMS)

Linking company information systems and production

systems result in an increased ability to plan for changes in

seasonal demand changes

Automatic equipment produces small batches of differentproducts on the same production line to meet demand




2-Soft Manufacturing

Emphasis on computer software and

networks rather than production equipmentdoes not rely on complete automation, recognizing that human labour

can excel in ways that machines cannot

Humans can do fine work and do not break down or wear out the

way robots do

Allows firms to meet the needs of customizedproducts for individual customers .




Layout Planning for Producing Services

Differs for low and high contact systems

Low-contact systems : should be designed to enhance service production

= use process layouts for custom jobs .

= specific functions such as computing , photography are performed in

specialised areas of the store

High-contact systems : should be arranged to meet customer’s needs and

expectations

= customers must pass by the whole serving line before making selection ,

to help them makeup their minds , but to attempt them to select more .




=Identifies areas that pose potential problems “fail points”

=each fail point can potentially create a bad service experience

=Can aid service scheduling by indicating what consumers expect

good service vs. a bad service







Scheduling Goods Operations

Master production schedule (top level)

Which products will be produced

When will production occur

What resources will be used

Time periods for resource use

Short-term detailed schedule:

--Task assignments, order information, production specifics to meet

incoming orders




Scheduling Service Operations

Requires scheduling both work and employees

1-In case of : low-contact services

scheduling based on desired completion dates and/or arrival of orders (autorepair) and less direct customer involvement

2- In case of : high-contact services

Scheduling must be accommodate ( match with ) specific customer needs

(emergency medical care) and customer is directly involved in the productionprocess




Operations Control

1-When long range plans are in place

2-Operations control requires production managers to monitor performanceby comparing results to original plans

3-Follow-up requires checking up to ensure that production decisions are

being implemented




Materials ManagementThe management of materials from purchasing to distributing of finished

goods

Standardization :

1-using standard and uniform components in the production process

2-may involve common parts or components across product lines

3-saves production costs

4-simplifies the materials management process

Supplier Selection

1) Survey possible suppliers2) Visit and evaluate each supplier

3) Negotiate terms for dealing with appropriate suppliers

4) Develop an ongoing order routine and maintaining the buyer-sellerrelationship





Process Control: Training Workers

1-Staff skills are essential to render high quality goods and

services

2-Staff manage both sales and service production :

human relations skills are vital in high-contact services=technical skills are vital in low-contact services

=human relations skills and technical skills are vital in high-

contact services





Materials Requirements Planning

(MRP)

Inventory control method in which a computerized bill of

materials is used to estimate production needs so that

resources are acquired only as they are needed in the

production processBill of materials

= A list of goods that are needed in the production processes, and

the method of combining the resources





Manufacturing Resource Planning

(MRP II)

1- Advanced version of MRP

2-Ties together all parts of the organization into the company’s

production activities :

Production

Inventory

Human resources

MarketingFinance





Quality Control

manufacturing goods or

supply services that meet

specific quality standards





Meeting the Challenge of Customization

Customer contact can be minimized by:

1-using reservations or appointment-only systems

2-handle routine transactions/requests by mail or telephone

3-locate exchange points at remote spots more accessible tocustomers

5-separate service consumption from its booking (such as airline

services)




Meeting the Challenge of

Un-storability

If services are not consumed when ready, they are lost

ensuring that :

hotel rooms are not empty

airline seats are full

doctors’ office hours are not wasted

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Griffin Bus Ch11-b